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Shared Ownership Mortgage

Shared ownership means that ownership of a piece of property with a public entity (like a Housing Association). Shared ownership is often called “part buy, part rent” and this is one of the most important ways that shared ownership is different from other variations of “joint ownership.” Basically, you buy a part of a share of a piece of property that is usually owned by the housing association and then you pay rent on the portion of the property that you don’t own. Shared ownership lends itself to becoming “full” ownership because it leaves open the ability for one of the partners to buy the rest of the portions of the property over time. This gradual buying of pieces is often called “stair casing.”

Finding a mortgage lender to sell you a shared ownership mortgage is often a little bit tricky because there are mortgage lenders who think that shared ownership contains a much higher risk than the traditional forms of mortgages. Some people like to argue that the reason shared mortgages looked at with such hesitation is that, through shared ownership, people who are not financially secure are often able to obtain property.

Another reason that mortgage lenders are hesitant to enter into a shared mortgage lending arrangement is that it is tricky from a legal standpoint. This is because a third party is brought into the equation. Yet another reason that shared mortgages are considered risky is that, with shared ownership mortgages, people are often able to buy a piece of property that normally they would never be able to afford and there is no guarantee that they will ever own the property outright.

There are certain stipulations to think about before entering into a shared ownership mortgage agreement:

Not all lenders will let you enter into a deal that offers you a mortgage that is exactly worth the value of your portion of the piece of property you are trying to buy.

There will often be additional expenses like stamp duty and legal fees. You will not be allowed to borrow extra money to cover these fees, so make sure you have enough money already saved to pay for them as they occur.

Of the mortgage lenders that will lend you money for a shared ownership mortgage, not all of them will cover all types of property. Make sure you know exactly what kind of property your mortgage lender will cover.

A shared ownership mortgage must also go through a social landlord who is registered before the funds can be disbursed. There must also be clauses contained in the mortgage that cover the lender in the event that you can’t repay your debt or the property is repossessed.

Usually the first share of the property that is purchased is required to be at least twenty five percent.
Shared ownership mortgages are a tricky business and not for those who do not know what they are doing. A regular mortgage is a much better option.

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